Domestic air travel within Australia.

Domestic air travel in Australia is expensive because it's dominated by a couple of carriers (Qantas/Jetstar and Virgin) and because it's the only viable option for long distance travel for anyone who doesn't have days to spend driving. Sydney-Melbourne in particular has high load factors due to a huge amount of business travel between the two cities (loaded with passengers who are not budget conscious).

There's no real 'crap shoot' involved in pricing- the budget fares sell out early, so if you book late you're left with higher priced fares. Personally I avoid Jetstar where possible due to their unreliability. Virgin is pretty good for the price, and Qantas is comfortable but normally more expensive.

On fares, the cheapest fares will be the least convenient time (ie mid morning, mid afternoon), so if time doesn't bother you, go for it. If you do choose to fly Jetstar, check which airport they're flying to - eg for a Melbourne some of their flights use Avalon airport, which is much further from Melbourne than the main Tullamarine airport.

In addition to the factors Simon mentioned, you're travelling at absolute peak season (school holidays, the Australian Open is on, there's a public holiday on January 26th...)

That said, I've checked some of your dates on Qantas/Jetstar, and the prices look pretty typical. I hate to say it, but I was expecting worse! For reference, the cheapest I've flown Sydney-Melbourne (Tullamarine) in recent years in peak season was AUD $175 one way for one adult without checked bags, and that was with Jetstar at lunchtime on a weekday.

Very early, noon, or late flights are usually a fair bit cheaper, and - assuming you know what you're in for, as mentioned above - the cheaper Sydney to Melbourne (Avalon) can be a good deal if you're heading in that direction (e.g. Geelong/Great Ocean Road).

Virgin is sometimes cheaper domestically than Qantas/Jetstar - it varies. I always check both on routes where there's a choice.

Oh, and regarding Jetstar's reliability, the worst issues tend not to be on the busiest direct routes like Syd-Mel. I'd be a bit careful around non-connecting travel, but that applies regardless (e.g. don't book the last possible Hobart-Sydney flight before a next-morning international connection - if something goes wrong you are very stuck).

And the other thing I should add is if you can fly on one of the first few flights in the morning, do. If things fall apart (which they do fairly often), it tends to happen in the afternoon, when airport announcements regularly begin with the words "Due to the late arrival of the inbound aircraft...", or (worse) "this flight has been delayed due to operational reasons". As you can guess, I find flying domestically in Australia deeply frustrating...

Hmmm, I checked my flights and prices from last year (not actually relevant to your question) and saw I flew Virgin Melbourne to Hobart for under $70 with a checked bag and under $85 on the return on Jetstar. I thought that was pretty reasonable. (I truly can’t remember why I bought 2 one-ways instead of a round trip. )

I bought about 6 months out and flew end of Feb. I did not have the excellent advice you have received, so just got lucky with no problems with Jetstar (and I did have an international connection the following day) and the flight went to Tullamarine. Much later I read about Jetstar issues.

Good choice on 8 nights in Tasmania. I had 6 and it wasn’t enough.

Well, I went ahead and booked the Sydney to Melbourne. Jetstar, $132AUS/per person, one checked bag for each of us. I picked a 5 pm flight, so I'm already nervous, given the comments I've been getting. The late morning, afternoon flights were a lot more expensive. I didn't want to do early morning, for fear of not getting to the airport on time. For the other two sets, I guess, I will look for earlier in the day. I will be driving from Yarra Valley for the flight to Hobart, so I don't want to get too early.

I don't have an itinerary for Tasmania yet, so I'm hesitant to book those flights. Sounds like I should get goin

My apologies for the duplicate earlier post - I've now deleted the extra one.

@jules, if it helps, I flew Jetstar Sydney-Melbourne at 5pm less than three weeks ago and we departed without any real delay and arrived on time. (Plus there was only one cancellation on the departure board all afternoon.) Same was true of a similarly timed flight back in March, and the previous September, so problems are not inevitable. Also, there are still a number of flights after 5pm if something does go wrong.

But I'd definitely want a bit more of a buffer for Tassie, especially on the return.

(@TexasTravelMom, those prices were amazing! But not typical, I don't think. Even if we're not thinking in the same dollars, everything I see now is a fair bit more.)

If it’s any comfort, Jetstar doesn’t really have a significantly worse late arrival or cancellation rate within Australia. Official figures.
https://www.bitre.gov.au/statistics/aviation/otp_month
My family often flies Jetstar, and haven’t had any major issues. We’ve had more on Virgin. Jetstar is strict about luggage weights/sizes though.

Snoozy, those are U.S. dollars, not AU dollars. And a year ago. :)